New Regulations to Help Consumers Appeal Decisions by Their Health Plans

On July 22, 2010, the Departments of Health and Human Services, Labor, and Treasury released the interim final rules. These rules allow consumers to obtain an independent third-party review of claims denied by their health plans as required under the Patient Protection and Affordable Care Act (PPACA) and Health Care and Education Reconciliation Act. This will apply to plans created or significantly changed on or after Sept. 23, 2010.and will afford consumers the right to an external appeal of their claims. Millions of health plan subscribers will have standardized internal and external appeals processes to challenge the health plans’ decisions. It is estimated that 41 million people by 2011 (31 million people in new employer plans and 10 million people in new individual plans) and 88 million people by 2013 (78 million people in new employer plans and 10 million people in new individual plans) will be guaranteed the right to appeal decisions made by their health plan.

The interim final rules promise to “simplify the system for consumers” by standardizing the process by which appeals are filed. All new health plan holders will have access to both internal and external review systems that are clearly defined and readily understandable to the average consumer. It will give consumers in new health plans in every state the right to appeal decisions made by their health plan through the plan’s internal process, and for the first time, the right to appeal decisions made by their health plan to an outside, independent decision-maker, regardless of which State they live in or what type of health coverage they have.

Under the rules, new health plans beginning on or after Sept. 23, 2010 , must have an internal appeals process for beneficiaries to challenge “adverse benefits decisions” — a “denial, reduction, or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit.” Such adverse benefits decisions may be based on individual eligibility, benefit coverage, limitations on otherwise covered benefits (such as preexisting condition exclusions, source-of-injury exclusions, and network exclusions), and a determination that a benefit is experimental or not medically necessary. In addition, health plans must do the following:

Notify a claimant of a benefit determination as soon as possible;

Provide claimants, free of charge, with the evidence relied upon and the rationale for the decision;

Avoid conflicts of interest by making decisions regarding hiring, compensation, termination, and promotion independent of a claims adjustor or medical experts record of denial of benefits; and

However, these requirements do not pertain to so-called “grandfathered health plans” — those health plans that were in existence before March 23, 2010 when PPACA was enacted. In the individual market, health insurance providers must meet the foregoing requirements as well as the following three:

Applicants for individual insurance must be allowed to appeal initial eligibility determinations;

Internal review must be limited to a single level, allowing claimants to appeal to external or judicial review immediately; and

Insurers must maintain all claims and notices for a minimum of six years, which is already required of employer-sponsored health plans under ERISA.

As Kaiser Health News reported, “This is a regulation that benefits everyone — consumers get protections, business and providers get more certainty in the rules and the need for litigation to settle these issues should be dramatically minimized,” Phyllis Borzi, assistant secretary of the Department of Labor, said at a briefing for reporters. America’s Health Insurance Plans is reviewing the rule to compare it with existing state appeals standards, said AHIP spokesman Robert Zirkelbach. “Health plans have a long track record of supporting third-party review to give patients greater peace of mind about their health care coverage.”

Internal Appeals

The internal appeals process will guarantee a venue where consumers may present information their health plan might not have been aware of, giving health plan holders a straightforward way to clear up misunderstandings. Under the new rules, new health plans beginning on or after September 23, 2010 must have an internal appeals process that:

Allows consumers to appeal when a health plan denies a claim for a covered service or rescinds coverage;

Gives consumers detailed information about the grounds for the denial of claims or coverage;

Requires plans to notify consumers about their right to appeal and instructs them on how to begin the appeals process;

Ensures a full and fair review of the denial; and

Provides consumers with an expedited appeals process in urgent cases.

The New Claim Process adds 6 new internal review requirements of the Current Claim Process.

If the plan administrator or its delegate fails to comply with any of the internal review requirements, the claimant is permitted to initiate either the external review process or judicial review. If the claimant chooses to begin judicial the court will be permitted to review the claim or appeal “de novo”.

Adverse Benefit Determination. The New Claim Process expands the definition of adverse benefit determination for purposes of the internal review to include a rescission of coverage, which is a cancellation or discontinuance of coverage that has retroactive effect. This provision expands the internal review process to include claims regarding eligibility to participate in the plan. A rescission will be considered an adverse benefit determination even if there is no adverse effect on any particular benefit.

Timing of Notice of Determination. The notification timing requirement for an urgent care claim is more stringent under the New Claim Process than under the Current Claim Process. If a claimant files an urgent care claim, the New Claim Process requires the plan to notify the claimant of the benefit determination (whether adverse or not) as soon as possible, but not later than 24 hours after receipt of the claim, assuming the claimant has provided sufficient information for the plan sponsor to make a determination. The notification requirement under the Current Claim Process is 72 hours.

Additional Evidence. The New Claim Process requires plan administrators to provide a claimant with any new or additional evidence considered in connection with the claim for benefits. Before a plan administrator (or its delegate) can issue a denial of an appeal based on a new or additional rationale, the claimant must be provided with the new rationale sufficiently in advance of the deadline by which the notice of denial must be issued so that the claimant has a reasonable opportunity to respond prior to that date. This requirement may impose an additional burden on the plan administrator (or its delegate), as the requirement presumes that the determination to deny the appeal is made sufficiently in advance of the deadline, which is not always the case.

No Conflicts of Interest. The New Claim Process is designed to ensure the impartiality of the claim and appeal process by mandating that the compensation, termination, promotion and other terms under which persons are retained to handle a plan’s claim and appeal process not be based on the likelihood that the person will support a denial of benefits. Style and Content of Notice. Notices of denial must, in addition to complying with the Current Claim Process, be written in a culturally and linguistically appropriate manner. In addition, the notices must include:

a. Sufficient information to identify the claim involved, such as the diagnosis code and treatment code.

b. A description of the standard used to deny the claim

c. In the case of an adverse determination of a final internal appeal, a discussion of the denial decision.

d. The availability of, and contact information for, consumer assistance to assist enrollees with the claim and appeal process. A model notice that satisfies the New Claim Process will be posted on the websites for the DOL and the Department of Health and Human Services.

External Appeals

State External Review Process

If a patient’s internal appeal is denied, patients in new plans will have the right to appeal all denied claims to an independent reviewer not employed by their health plan Prior to these provisions, the Employee Retirement Income Security Act of 1976 (ERISA) provided the standards for internal appeals processes. However, external appeal laws were dictated by individual state laws. Although there are forty four states which already have some form of independent appeals process, these laws vary from state to state that often leave gaps. States are encouraged (though not required) to adopt or update their appeals processes to be consistent with standards established by the National Association of Insurance Commissioners (NAIC).

The list of standards is lengthy. Some of the more significant protections include:

The insurer or state must be responsible for payment for the external review conducted by an independent review organization (an “IRO”), with the claimant paying a filing fee of up to $25.

The plan may not require that a claim exceed a minimum dollar amount to be eligible for external review.

The process for assigning an IRO to a particular claim must ensure independence and impartiality.

Generally, an IRO must advise a claimant of the decision within 45 days after receipt of the request for external review. However, a 72-day turnaround applies if requested by the claimant and

I. a longer response period would jeopardize the life or health of the claimant or the claimant’s ability to regain maximum function or

II. the determination concerns admission, availability of care, continued stay or health care service for which the claimant received emergency services and has not yet been discharged.

The New Claim Process requires plans to comply with either a state or federal external review process. However, a claimant is not required to use the external review process prior to filing a claim under Section 502(a) of ERISA. The New Claim Process does provide a basis for determining when a state or federal review process is applicable, as follows:

Self-Insured Plans

Self-insured plans covered by ERISA are subject to the federal external review process.

Self-insured plans not covered by ERISA (such as nonfederal governmental plans and church plans) are subject to the applicable eligible state process that complies with the Uniform Health Carrier External Review Model Act promulgated by the National Association of Insurance Commissioners (the “NAIC Uniform Model Act”), if any.

Insured Plans

Generally, for insured group health plans, the state external review process will apply and the issuer, rather than the plan, will have the obligation to satisfy the requirement to provide an external review process.

The federal external review process will apply to insured plans if

I. The state external review process does not comply with the NAIC Uniform Model Act or

II. There is no applicable state external review process.

These standards were established by the National Association of Insurance Commissioners (NAIC) and call for:

External review of plan decisions to deny coverage for care based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.

Clear information for consumers about their right to both internal and external appeals – both in the standard plan materials, and at the time the company denies a claim.

Expedited access to external review in some cases – including emergency situations, or cases where their health plan did not follow the rules in the internal appeal.

Health plans must pay the cost of the external appeal under State law, and States may not require consumers to pay more than a nominal fee.

Review by an independent body assigned by the State. The State must also ensure that the reviewers meet certain standards, keep written records, and are not affected by conflicts of interest.

Emergency processes for urgent claims, and a process for experimental or investigational treatment.

Final decisions must be binding so, if the consumer wins, the health plan is expected to pay for the benefit that was previously denied.

External appeals have helped consumers get the care they deserve: one study found that – in States that had external appeals – consumers won their external appeal against the insurance company 45% of the time. If State laws don’t meet these standards by July 1, 2011, consumers in those States will be protected by comparable Federal external appeals standards.

Federal External Review Process

The Departments have not yet issued guidance on the federal external review process. However, it is expected to be similar to the state process described above and to comply and to include the following requirements:

A description of how a claimant may initiate an external review, procedures for determining if a claim is eligible for external review and a process for assigning IROs.

Additional consumer protections for claims involving experimental or investigational treatments to ensure adequate clinical and scientific experience and protocols must be taken into account.

External review decisions must be binding on all parties, unless other remedies are available, such as the right to file a claim under ERISA.

Interestingly, the federal external review process (unlike the internal review portion of the New Claims Process) will not apply to adverse determinations relating to the failure of a participant or beneficiary to meet the plan’s eligibility requirements.

Labor coverage

The current Department of Labor (“DOL”) claim and appeal process remains in effect for plans that maintain their grandfather status (the “Current Claim Process”). The New Claim Process incorporates the Current Claim Process but also expands the scope of the internal review for claims and appeals, imposes new disclosure and notice requirements and requires an external review process.

New rules for health plan appeals

Require subscribers first to launch an internal appeal of any disputed health plan coverage denials, including claims denials and rescissions.

Encourage states to adopt the federal external appeals standards by July 1, 2011. The federal government will provide an appeals process for states that do not offer one.

Require health plans to pay the cost of external appeals, with subscribers paying nominal fees. Insurers also will be required to expedite appeals for urgent claims.

Source: Dept. of Health and Human Services

Barak Mevorak, MD is the VP of Quality & Compliance for Advanced Medical Reviews, a URAC accredited, technologically based, Independent Review Organization in Los Angeles, CA. A sought after presenter in managed care circles; Dr. Barak Mevorak is also the co-founder of Advanced Medical Reviews Inc., which provides fully integrated, innovative, web-based applications and productivity enhancing capabilities that help modernize the internal operations for managed care organizations. He has over thirteen years of experience with the U.S. healthcare market, and healthcare technology, Dr. Mevorak received his Bachelor’s Degree in Physiology at UCLA in 1992. He completed post-baccalaureate training, with an emphasis in Public Health, at Harvard University and obtained his Medical Doctorate from St. George’s University. Dr. Mevorak has clinical training in Internal Medicine and completed a residency in Physical Medicine & Rehabilitation at UCLA. His clinical experience includes inpatient and outpatient rehabilitation services, industrial medicine, and he is a Qualified Medical Examiner. He served as Director of Pain Management and Occupational Medicine, where he directed interdisciplinary pain management and rehabilitation programs, and was responsible for development of a comprehensive industrial medicine program. Recently he has also been involved as a participant in the California Health Care Foundation Leadership program at the center for the health professions at UCSF.